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With terms like 'excess' and 'endorsement' used by risk professionals every day it's helpful to know what they mean in plain English. And no, 'excess' isn't something that happens at the best parties!

Flood Insurance

This is designed to reimburse property owners from loss due to flood. Usually sold in connection with a government flood insurance plan. Some insurers no longer offer insurance policies in places where there is a high risk of flooding.

Accident, Sickness and Unemployment Insurance

This scheme provides people with a tax-free monthly income if they can't work because they're sick or unemployed. It usually lasts for 12 or 24 months.


A condition which means that all claims will be proportionately reduced in the event of underinsurance.


This is the person who receives an insurance payout when someone with life assurance dies.


An application made to an insurance company by one of their policyholders, when something has gone wrong - this could be anything from a dented car to a multi-million dollar sports injury.

Comprehensive Insurance

This is insurance that gives wide-ranging cover. Normally applies to motor insurance that includes damage to own vehicle(s).


This arises when the subject matter, insured entity and cause of loss are insured more than once.


This is the amount that something is insured for - for example, life insurance cover can be for £100,000.

Critical Illness Cover

People pay into a Critical Illness policy so that they receive a one-off sum of money if they are diagnosed with a specified critical illness.

Decreasing term insurance

This type of policy is one in which the amount insured for goes down over the term of the policy. It is often used to protect a repayment mortgage as the amount owed goes down each year.


This is effectively a large excess and the sum insured should include the amount of the deductible. This usually applies to property risks.

Employers' Liability Insurance

Every UK employer has to have this kind of policy, which protects an employer against accidents to employees.


An amendment to an insurance policy eg a change of address or a new driver added to the policy.


This is a life insurance policy that pays out a lump sum to the person who holds it when their policy matures. They are often described as a combination of savings and insurance because the money paid is invested in stocks and shares.


Refers to the property, money and possessions of a person at time of death - everything they own, in fact.


The amount that someone has to pay before the insurance company will make a contribution towards a claim.


An event or circumstance where the insurance company doesn't have to pay and compensation under the policy.

Flood Insurance

This is designed to reimburse property owners from loss due to flood. Usually sold in connection with a government flood insurance plan. Some insurers no longer offer insurance policies in places where there is a high risk of flooding.


The first part of a claim in terms of the money or time which is not paid, but beyond which the full loss is paid without deduction.

Hazardous Activity

Any activity which the insurer believes to be high risk, eg hang gliding or rock climbing.

Income Protection

This kind of policy provides a tax-free monthly income when someone is unable to work due to sickness, accident, redundancy or injury.

Increasing Benefit

Increasing benefit is a form of protection against inflation. In other words, the benefit would increase each year in line with inflation or by an agreed amount.

Inheritance Tax

A form of tax, also known as IHT, that is paid on a person's estate when they die.

Insurance Premium Tax (IPT)

A tax on nearly all insurance policies including car insurance policies (but excluding life insurance).

Joint Policy

This is where two people are insured on the same life insurance policy and the insurance pays out on the first death. After this the policy expires.

Key Man Insurance

This term refers to an insurance policy used to cover an employee considered to be a key employee or business partner.

Level term insurance

This is a scheme where the sum you are insured for stays the same throughout the term of the policy.

Liability Insurance

This covers sums that the insured is legally liable to pay, plus legal defence costs.

Life insurance

This is one of the most popular types of insurance policies, which pays out a set amount of money to a named person when a policyholder dies. It is useful for those with a family to help provide financial security.

Loss Ratio

This is the ratio of total losses paid out in claims plus adjustment expenses divided by the premiums the company has received from policyholders. If an insurance company pays out £70 in claims for every £100 in collected premiums, then the loss ratio is 70%. 

Market value

This is another way of saying how much an item is worth - such as a car or jewellery - of similar age and in similar condition at the time you make a claim.

Mortgage term insurance

This offers protection to cover a mortgage for a specific term.

Operative Clause

A part of a policy setting out what is covered.

Physical assault

An intentional violent act committed by a person that causes death or serious bodily injury.


The policy is the essential part of the business. It is a contract or document between the insurance company and the policyholder that sets out the legal rights and obligations of each party.


The amount paid by someone for insurance.


The process in which the estate of someone who has died is settled.

Professional Indemnity Insurance

This type of insurance is popular with those in the legal and medical professions. It offers coverage against negligence or misunderstandings that can result in court cases or legal action.

Public Liability

This protects companies against any costs if a member of the public is injured on their premises eg a shop or cinema.


Insurance that an insurance company buys for its own protection, spreading the risk amongst lots of insurers. Reinsurance allows companies to get involved with major risks. 

Renewal notice

This is what businesses and individual policyholders get from their insurance company when the time comes to renew a policy.

Reviewable critical illness cover

The premiums with this type of cover are reviewed to see if they will change.

Reviewable term insurance

The premiums will usually increase every year.


Risk is used to describe the chance of someone making a claim. For life insurance this is assessed using health, age, occupation, lifestyle, gender and family medical history.

Shareholder Protection

Usually taken out to protect a business loan or mortgage and will pay out a lump sum if someone dies. It can also be used to protect shares by company directors. 

Single Policy

Where only one person is insured on a policy.


Where a party, having paid out under a contract, takes over the rights of the party with whom they have settled. An insurer will acquire the legal rights of a motorist when they have paid out for damage to their car caused by a third party and will therefore be able to recover their outlay.

Sum assured

The amount of cover that a policyholder asks to be insured for.

Sum Insured

This is the amount for which the subject is covered.  


The length of time the policy runs for.

Term insurance

Life insurance for a set term which will pay out a tax-free amount if the policyholder dies.

Third party

A party involved in a claim who is neither the policyholder nor the insurance company.


A means of managing a person's estate after they've died.


The amount by which an item is underinsured - for example a house which may cost £100,000 to rebuild but is only insured for £90,000.


This describes when the sum insured or the declared value is lower than the value of the risk.

Underwriter (also Insurer)

The person who evaluates the risks and determines the premium and level of coverage.


The process of selecting risks (or rejecting unsuitable risks) for insurance and agreeing premiums.

Utmost good Faith

In other words, the insurance company trusts that the policyholder has given them all the relevant information they need, and hasn't lied or missed any important information.

Voluntary Reserve

An allocation of surplus not required by law. Insurers often accumulate such reserves to strengthen their financial structure. 

Write Off

A vehicle which is either, in the view of the insurance company, not capable of being repaired or which would cost more to repair than to replace.

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